The percentage-of-completion method must be used when certain conditions exist. Which of the following is not one of those necessary conditions?
a. Estimates of progress toward completion, revenues, and costs are reasonably dependable.
b. The contractor can be expected to perform the contractual obligation.
c. The buyer can be expected to satisfy some of the obligations under the contract.
d. The contract clearly specifies the enforceable rights of the parties, the consideration to be exchanged, and the manner and terms of settlement.
20 . The principal disadvantage of using the percentage-of-completion method of recognizing revenue from long-term contracts is that it
a. is unacceptable for income tax purposes.
b. gives results based upon estimates which may be subject to considerable uncertainty.
c. is likely to assign a small amount of revenue to a period during which much revenue was actually earned.
d. none of these.
21 . Which of the following is a limitation of the balance sheet?
a. Many items that are of financial value are omitted.
b. Judgments and estimates are used.
c. Current fair value is not reported.
d. All of these
22 . The net assets of a business are equal to
a. current assets minus current liabilities.
b. total assets plus total liabilities.
c. total assets minus total stockholders’ equity.
d. none of these.
23 . The current assets section of the balance sheet should include
a. machinery.
b. patents.
c. goodwill.
d. inventory.
24 . Which of the following is a current asset?
a. Cash surrender value of a life insurance policy of which the company is the bene-ficiary.
b. Investment in equity securities for the purpose of controlling the issuing company.
c. Cash designated for the purchase of tangible fixed assets.
d. Trade installment receivables normally collectible in 18 months.
25 . An example of an item which is not an element of working capital is
a. accrued interest on notes receivable.
b. goodwill.
c. goods in process.
d. temporary investments.
26 . Which of the following should be disclosed in a Summary of Significant Accounting Policies?
a. Types of executory contracts
b. Amount for cumulative effect of change in accounting principle
c. Claims of equity holders
d. Depreciation method followed
